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GAO reviewed the Department of Agriculture, Agriculture Marketing Service's (Service) new rule on mandatory country of origin labeling of covered commodities. GAO found that (1) the final rule implements provisions in the Farm Security and Rural Investment Act of 2002 and the Food, Conservation, and Energy Act of 2008, that require retailers to notify their customers of the country of origin of covered commodities including muscle cuts of beef (including veal), lamb, chicken, goat, and pork; ground beef, ground lamb, ground chicken, ground goat, and ground pork; wild and farm-raised fish and shellfish; perishable agricultural commodities; macadamia nuts; pecans; ginseng; and peanuts; and (2) the Service complied with the applicable requirements in promulgating the rule.

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Agriculture (USDA), Agricultural Marketing Service, entitled Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts (RIN: 0581-AC26). We received the rule on January 15, 2009. It was published in the Federal Register as a final rule on January 15, 2009. 74 Fed. Reg. 2658.

Enclosed is our assessment of the USDA's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. USDA did not address the Unfunded Mandates Reform Act of 1995 in the final rule. Our review of the procedural steps taken indicates that USDA complied with the other applicable requirements.

If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Shirley A. Jones, Assistant General Counsel, at (202) 512-8156.

USDA conducted a cost-benefit analysis of this final rule. USDA concluded that the estimated economic benefits of this final rule are difficult to quantify but likely to be small. The estimated first-year incremental costs for growers, producers, processors, wholesalers, and retailers are $2.6 billion. The estimated cost to the United States economy in higher food prices and reduced food production in the 10th year after implementation of the final rule is $211.9 million.

USDA determined that this final rule will have a significant economic impact on a substantial number of small entities, and, therefore, prepared a final regulatory flexibility analysis. USDA stated that the statutory requirements for country of origin labeling (COOL) are prescriptive and provide little regulatory discretion for this rulemaking. Nonetheless, USDA considered alternatives that would reduce the impact on small business. For example, the rule does not dictate systems that firms will need to put in place to implement the requirements; different segments of the affected industries will be able to develop their own least-cost systems.

There is no express reference to the Unfunded Mandates Reform Act in the final rule.

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. sections 551 etseq.

USDA promulgated this final rule using the notice and comment procedures found in the Administrative Procedure Act. 5 U.S.C. sect. 553. On October 30, 2003, USDA published a proposed rule for the mandatory COOL program with a 60-day comment period. 68 Fed. Reg. 61,944. On June 20, 2007, USDA reopened the comment period for the proposed rule for all covered commodities. 72 Fed. Reg. 33,917. USDA published two interim final rules requesting comment, one for fish and shellfish on October 5, 2004, 69 Fed. Reg. 59,708, and one for covered commodities other than fish and shellfish on August 1, 2008, 73 Fed. Reg. 45,106. USDA responds to the comments in the final rule.

Paperwork Reduction Act, 44 U.S.C. sections 3501-3520

The final rule contains new information collection requirements that have been approved by the Office of Management and Budget (OMB) and have been assigned OMB Control Number 0581-0250.

The final rule was reviewed by OMB and found to be an economically significant regulatory action under the Order.

Executive Order No. 13,132 (Federalism)

The final rule does have federalism implications under the Order. USDA concluded that, while the 2002 and 2008 Farm Bills do not contain express preemption provisions, it is clear from the language in these statutes that Congress intended preemption of state law.